diff --git a/e2e/playwright/file-tree.spec.ts b/e2e/playwright/file-tree.spec.ts
index edafbac9c2..923273804f 100644
--- a/e2e/playwright/file-tree.spec.ts
+++ b/e2e/playwright/file-tree.spec.ts
@@ -45,7 +45,6 @@ test.describe('integrations tests', () => {
             {
               title: 'test-sample',
               fileCount: 1,
-              folderCount: 1,
             },
           ],
           sortBy: 'last-modified-desc',
@@ -233,7 +232,6 @@ test.describe('when using the file tree to', () => {
             {
               title: projectName,
               fileCount: 2,
-              folderCount: 2, // TODO: This is a pre-existing bug, there are no folders within the project
             },
           ],
           sortBy: 'last-modified-desc',
diff --git a/e2e/playwright/fixtures/homePageFixture.ts b/e2e/playwright/fixtures/homePageFixture.ts
index 4987ad1f23..a5d444f81f 100644
--- a/e2e/playwright/fixtures/homePageFixture.ts
+++ b/e2e/playwright/fixtures/homePageFixture.ts
@@ -4,7 +4,6 @@ import { expect } from '@playwright/test'
 interface ProjectCardState {
   title: string
   fileCount: number
-  folderCount: number
 }
 
 interface HomePageState {
@@ -61,15 +60,13 @@ export class HomePageFixture {
     const projectCards = await this.projectCard.all()
     const projectCardStates: Array<ProjectCardState> = []
     for (const projectCard of projectCards) {
-      const [title, fileCount, folderCount] = await Promise.all([
+      const [title, fileCount] = await Promise.all([
         (await projectCard.locator(this.projectCardTitle).textContent()) || '',
         Number(await projectCard.locator(this.projectCardFile).textContent()),
-        Number(await projectCard.locator(this.projectCardFolder).textContent()),
       ])
       projectCardStates.push({
         title: title,
         fileCount,
-        folderCount,
       })
     }
     return projectCardStates
diff --git a/src/lib/desktop.test.ts b/src/lib/desktop.test.ts
index 922cfbf827..5edcdf894a 100644
--- a/src/lib/desktop.test.ts
+++ b/src/lib/desktop.test.ts
@@ -46,9 +46,21 @@ describe('desktop utilities', () => {
       'project-without-kcl-files',
       'another-valid-project',
     ],
-    '/test/projects/valid-project': ['file1.kcl', 'file2.stp'],
+    '/test/projects/valid-project': [
+      'file1.kcl',
+      'file2.stp',
+      'file3.kcl',
+      'directory1',
+    ],
+    '/test/projects/valid-project/directory1': [],
     '/test/projects/project-without-kcl-files': ['file3.glb'],
-    '/test/projects/another-valid-project': ['file4.kcl'],
+    '/test/projects/another-valid-project': [
+      'file4.kcl',
+      'directory2',
+      'directory3',
+    ],
+    '/test/projects/another-valid-project/directory2': [],
+    '/test/projects/another-valid-project/directory3': [],
   }
 
   beforeEach(() => {
@@ -119,6 +131,15 @@ describe('desktop utilities', () => {
       )
     })
 
+    it('correctly counts directories and files', async () => {
+      const projects = await listProjects(mockConfig)
+      // Verify that directories and files are counted correctly
+      expect(projects[0].directory_count).toEqual(1)
+      expect(projects[0].kcl_file_count).toEqual(2)
+      expect(projects[1].directory_count).toEqual(2)
+      expect(projects[1].kcl_file_count).toEqual(1)
+    })
+
     it('handles empty project directory', async () => {
       // Adjust mockFileSystem to simulate empty directory
       mockFileSystem['/test/projects'] = []
diff --git a/src/lib/desktop.ts b/src/lib/desktop.ts
index 035f2ca81e..b9f8b971e8 100644
--- a/src/lib/desktop.ts
+++ b/src/lib/desktop.ts
@@ -307,7 +307,10 @@ const directoryCount = (file: FileEntry) => {
   let count = 0
   if (file.children) {
     for (let entry of file.children) {
-      count += 1
+      // We only want to count FileEntries with children, e.g. folders
+      if (entry.children !== null) {
+        count += 1
+      }
       directoryCount(entry)
     }
   }